Financial Modeling 101 - Revenue Forecasting

When it comes to building a financial model for your company, it can seem intimidating, but it really doesn’t have to be. In this video, we take a look at 3 different methods of building a financial model by focusing firstly on how to model out revenue projections, namely:
1. Easy - Growth Rate - This is as simple as it sounds (and most small businesses probably use this method). You can build your revenue projections by just applying a growth rate to each year to the historical financials or actuals that you have.
2. Medium - Units x Price - This is a little bit more complicated because you need a little more information from the historical period. This method multiplies the number of units sold multiplied by the average price per unit. Even if you have multiple units, you can use this financial modeling method by just using total revenue and total units.
3. Hardest (but still pretty simple) - Each Product units by price. While this is the most complicated because it requires the most information on a historical basis and makes the most assumptions about the projected financials.
Once you have built revenue for your financial model using one of these three easy techniques you can turn your attention to the other elements of the income statement which we will cover in other future videos.
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[@sohamsur2218]

Exactly what I was looking for. Thanks!

[@PluxeProperties]

Great video! Thank you!

[@contentbyed]

Thanks for watching!

[@williamstadelmann1643]

How would you recommend finding forecasting assumptions for complex company structures. For example retail companies with many products/changing lines/growing geographical area/etc . Additionally how much do you emphasise macro factors into these assumptions.

[@akshimagulati]

How to define growth rate multiple in product unit and price method

[@mehreensayed5470]

Very helpful video but my question is how to make assumptions of future growth rate?

[@contentbyed]

That is definitely the hardest thing to estimate. I would take into account past performance, the competitive landscape (ie what competitors are doing), macro economic assumptions, etc.

[@Thelordmezo]

Thnks

[@contentbyed]

Thanks for watching!

[@cheatcoder2]

How to actually get the correct growth rate instead of hard coding

[@contentbyed]

Good question and probably the hardest thing to determine / assume. Lots of people use historical financials to look at previous year growth rates and base their projections off of that. Others might take market data to look at how quickly the overall market is growing and make assumptions about market share to determine the growth rate. It isn’t easy and that’s why lots of folks might run different scenarios as well.

[@cheatcoder2]

@@contentbyed is it safe for me to think in the end you are guessing the growth using market data.(Idk much about finance don't judge me pls)

[@contentbyed]

Unfortunately when you’re forecasting anything, essentially it is a guess. It’s just a case of how educated a guess it is based on the market and historical performance.

[@sadieshannon4255]

Can you make a video on how to make educated “guesses” for growth rate? What elements to consider, what to watch or search to predict market trends, etc.

[@sahuanil90]

Excel plz